For me intraday sometimes even feels like long term. Especially when I have a open position that is constanly around breakeven and does not want to go in profit for 1-2 hours.
Can Short Term Trading Be More Profitable Than Long Term
- Thread starter Fundlord
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For me intraday sometimes even feels like long term. Especially when I have a open position that is constanly around breakeven and does not want to go in profit for 1-2 hours.
I agree. In fact, many proprietary firms do not allow traders to hold positions over night, i.e. they only do intraday trading. The best thing about intraday trading is, as you said, keeping the captical safe. First, You would not hold a losing position for many hours (have to cut losses fast), so the drawdown could be well-controlled (if you are an experienced trader). Second, you would never encounter a surprise gap because of some important news overnight.
Answering the OP's question is not so simple.
I think you should try to find out what works best for YOU. There is no general rule, although I must admit that, from what I read, statistically most people survive longer if they don't daytrade but trade in longer timeframes. But my personal experience is that it is a general rule but not an absolute one, as I daytrade.
So a few general remarks of what I personally find are important elements when you decide what to do:
That's what everybody should try to find out: where are my limits and what is the best I can get out of the market? And don't fool yourself because you will pay a price if you do that.
Start humble and carefully, and when confidence and good results grow, you can grow too.
I think you should try to find out what works best for YOU. There is no general rule, although I must admit that, from what I read, statistically most people survive longer if they don't daytrade but trade in longer timeframes. But my personal experience is that it is a general rule but not an absolute one, as I daytrade.
So a few general remarks of what I personally find are important elements when you decide what to do:
- Try to find a way to understand the market. So you should find out if for you intraday is easier than longer term or the opposite. If you don't understand what is happening and more important WHY? You should be careful, no matter what timeframe you trade in.
- The longer the timeframe you trade in, the more difficult it becomes to know with high probability where the market will go. This is because the potential range in which prices will move grows with time. In a 1 minute period price will mostly move in a small range (let's say less than 1%). But in a 1 day period price will mostly move in a much bigger range. So the bigger the potential range, the more difficult it becomes to know where, and how far the price will go.
- Time is also important. To me the accuracy of probabilities diminishes exponentially with the increase of time. Accuracy of probabilities in 1 minute periods are still doable, but accuracy of probabilities in a 1 week period becomes much more difficult. "Where will the price be in 1 week" is more difficult than "where will the price be in 1 day".
- The important moves you should catch take only a small part of the total potential time you can be in the market. Being in the market means potential risk. You should only be in the market when the big money can be made. Limit your exposure to the maximum. After each move there is almost always a period consolidation. You should never be in the market in this consolidation period. At that time you should already have made the money. It is all about risk versus reward versus time.
- Going overnight happens at a price too. If you cannot define with enough probability what can happen at night, you should not go overnight. If you go overnight you lose all control over your position because you are not watching the market, which is equal to driving a car blindly. It will go good till you make a heavy crash or even a total loss. If you watch (in team) the markets 24/24 than the story is completely different.
That's what everybody should try to find out: where are my limits and what is the best I can get out of the market? And don't fool yourself because you will pay a price if you do that.
Start humble and carefully, and when confidence and good results grow, you can grow too.
You should know most of the traders in prop firm fail?
It depends on the market IMO and associate tardign cost. In forex and futures it is harder intraday because the game is zero-sum and cost is high even when it appears low. Tradign cost is the key to success. Someone has got to lose and I bet you it's not going to be the commercials and market makers, it's going to be the retail crowed. You could answer your question by doing a careful statistical study of returns. This has been done to some extent in this article for ES futures and for forex. These studies show that you must have a substantial edge to profit from intraday or even day trading in ES futures and forex. IMO the edge is primarily extra low cost and a good model based on micro structure.
Actually, at least in terms of the futures market, it isn't.
The key to success is a thoroughly-tested and consistently-profitable trading plan.
Theoretically.
Forex and futures are also used to hedge business deals or portfolios which has nothing at all to do with zero sum game.
I hedged on the LME metals, not for speculation but to protect the profit from the company from sales or long term running contracts. I also hedged in the Forex market deals where we sold or bought in $ and where the cost of the company was in EURO.
So people who say it is a zero sum game probable read this somewhere and repeat this over and over again without thinking themselves. Like parrots.
A part of forex and futures falls in the category zero sum game, or even negative sum game. But not the whole forex or futures business.
Trading cost is not the key to succes. A trade should have a profitable margin, that is essential. Like in every business. If you have no profitable margin even with zero cost you cannot make money. Cost can have an influence on the net profit. If trading cost would be the key to succes it would mean that lower cost means more profit. But this is completely wrong. There are people who pay 4$ a RT that have more profit than somebody who pays only 3* a RT.
Profit, or succes in trading= bruto profit margin - costs.
I hedged on the LME metals, not for speculation but to protect the profit from the company from sales or long term running contracts. I also hedged in the Forex market deals where we sold or bought in $ and where the cost of the company was in EURO.
So people who say it is a zero sum game probable read this somewhere and repeat this over and over again without thinking themselves. Like parrots.
A part of forex and futures falls in the category zero sum game, or even negative sum game. But not the whole forex or futures business.
Trading cost is not the key to succes. A trade should have a profitable margin, that is essential. Like in every business. If you have no profitable margin even with zero cost you cannot make money. Cost can have an influence on the net profit. If trading cost would be the key to succes it would mean that lower cost means more profit. But this is completely wrong. There are people who pay 4$ a RT that have more profit than somebody who pays only 3* a RT.
Profit, or succes in trading= bruto profit margin - costs.
Actually, none of it is. As long as each participant in a trade finds value in it, it is not zero-sum.